Stocks fell on Friday as data showed the economy shed more jobs than expected last month, increasing worries that the path to economic recovery will be slow.

Employment in July fell for a second straight month as more temporary government census jobs ended. But private employment, considered a better indicator of the health of the labor market, rose, though less than expected.

We're seeing an economy that's moving ahead slowly but not creating net, on balance, a lot of new jobs, said Fred Dickson, chief market strategist at The Davidson Cos in Lake Oswego, Oregon.

It points to continued expectations the economic slowdown we've seen will probably extend another two to three months, if not longer.

Consumer stocks were among the biggest losers as the jobs report added to worries about consumer spending, while a drop in oil prices weighed on the energy sector. The S&P consumer discretionary index <.GSPD> fell 1.5 percent and energy shares <.GSPE> lost 1.6.

The Dow Jones industrial average <.DJI> dropped 116.25 points, or 1.09 percent, to 10,558.73. The Standard & Poor's 500 Index <.SPX> lost 14.05 points, or 1.25 percent, to 1,111.76. The Nasdaq Composite Index <.IXIC> shed 30.86 points, or 1.35 percent, to 2,262.20.

The S&P fell to test its 200-day moving average around 1,115. Earlier in the session the level had provided support, but the index was struggling to maintain its grip there in late morning trading.

Kraft Foods Inc was a bright spot, gaining 2.3 percent to $30.33 after it reported higher-than-expected quarterly profit and raised its target for cost savings from the acquisition of Cadbury.

On the Nasdaq, Activision Blizzard Inc shed 5.5 percent to $11.09 after it forecast its current-quarter profit and revenue to come in below Wall Street's targets.

(Additional reporting by Caroline Valetkevitch; Editing by Padraic Cassidy)